Report: U.S. Should Prioritize Engagement with ASEAN

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Jun. 26 – With a GDP of $2.2 trillion, ASEAN is made up of over 620 million people spanning the 10 nations of Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. The region is host to the largest inflows of United States (U.S.) foreign direct investment (FDI) in Asia, and is the U.S.’s 5th largest trading partner and 4th largest exporter. ASEAN will see substantial growth rates in the coming decade, due to its young population, budding middle class, ongoing infrastructure development, and strategic position on Pacific trade routes.

The U.S.-ASEAN Council, an advocacy organization for U.S. organizations operating in ASEAN, recently released its 2013 policy paper on U.S. priorities in Southeast Asia, titled ‘American Economic Engagement with ASEAN: A Statement of Priorities.’

The paper labeled robust trade and investment components as key elements of the U.S.’s Asia-Pacific rebalancing strategy. Their five-year agenda also addresses constraints on expanding two-way trade and investment flows.

The policy paper sets forth a list of five flagship priorities towards the main goal of an integrated, globally connected ASEAN.

1. Focus on strengthening regional connectivity

Efforts to strengthen regional “connectivity” by developing hard and soft infrastructure to support greater cross border cooperation on energy security, movement of goods, capital people, and data are a central pillar in the development of the ASEAN Economic Community (AEC). The U.S. encourages ASEAN to strengthen its frameworks for protecting private investment and intellectual property rights. Furthermore, the Council urges ASEAN to confront the increase in the number of protectionist and nationalist trade and investment policies in critical “connectivity” areas, such as electronic payment systems, in order for ASEAN to create an AEC that is both regionally economically integrated and globally connected by the end of 2015.

2. Comprehensive U.S. engagement

As part of the Expanded Economic Engagement (E3) initiative, the U.S. should prioritize negotiating a series of binding economic agreements with the ASEAN countries on issues of mutual interest, including investment, information and communications technology, customs and trade facilitation, and maritime cooperation. These agreements aim to pave the way for all ASEAN countries to join the Trans-Pacific Partnership (TPP), an eventual APEC-wide free trade region.

3. US-ASEAN Free Trade Agreement (FTA)

Firstly, according to the Council, concluding the ambitious TPP agreement is important. The TPP will include four of the ten ASEAN members, which will provide a strong basis for a subsequent U.S.-ASEAN Free Trade Agreement. Due to the quickening pace of ASEAN’s economic integration, U.S. interests would benefit greatly from closer strategic and trade ties.

4. Promote engagement through inclusion

The U.S.-ASEAN Council believes the U.S. should support APEC membership for the three ASEAN countries currently not in the grouping, namely Cambodia, Laos and Myanmar. Furthermore, visa procedures should be simplified to encourage ASEAN business executives, other leaders and students to travel, invest, study, and work in the U.S. and vice versa. The U.S. government should continue to include officials from the above ASEAN countries in APEC-related activities and offer full participation in the APEC Business Travel Card to U.S. citizens. Currently all seven ASEAN members of APEC are full participants in the program. An immediate move to full membership would substantially improve speed and ease of travel for U.S. businesspeople in ASEAN.

5. Elevate engagement

The Council stipulates direct and regular CEO engagement with the ASEAN leaders, ideally led at the Vice Presidential or Cabinet level. Foreign governments and business communities engage in consistent, coordinated business advocacy efforts with ASEAN, and the U.S. should do no less.

Proposed Five Year Agenda

Foundations for a U.S.-ASEAN partnership are already strong. The U.S. exports US$75 billion worth of goods to ASEAN, and US$25 billion in services. ASEAN is also the recipient of US$170 billion of FDI from the U.S. Furthermore, ASEAN businesses are now investing in the U.S., with an FDI stake of US$25 billion in 2011.

Despite the potential of a partnership with Southeast Asia, however, there is reason to believe that the U.S.’s strategic relationship with the region is slipping. A 2012 report from the Center for Strategic and International Studies, titled ‘Developing an Enduring Strategy For ASEAN’, found that in the area of trade and investment ASEAN leaders often “find the United States less than fully engaged in their region and ceding too much leadership to China, Japan, Korea, and India.”

Why is there an imbalance in U.S. foreign policy torwards ASEAN? One reason is the TPP, which while promising will only include four ASEAN members, missing the largest ASEAN economy, two U.S. treaty allies, and three of the four newest members. The fragmentation of this move undermines the entire aim of political cohesion.

In contrast to U.S. policy, virtually all competitors in the region are conducting sophisticated, multi-faced diplomacy with ASEAN as a single entity. Australia, China, India, Japan, Korea and New Zealand have all signed free trade agreements with ASEAN.

To combat this diplomacy gap, the US-ASEAN Council proposes an agenda for the next five years built upon on the following pillars:

1. Address policies inconsistent with creating the AEC

Policies inconsistent with developing regional markets must be addressed. These policies include the restriction of data movement across borders or the requirement for service providers to relocate their information on shore in order to operate. These practices hinder the development of stock exchanges in ASEAN that are electronically linked, increase costs for ASEAN SMEs to access ICT resources, and make it more difficult for larger companies to become ASEAN corporates.

2. Conclude agreements with ASEAN on the way toward a more comprehensive agreement

In parallel with the efforts to conclude an agreement, the Council recommends developing initiatives focused on providing technical support to strengthen ASEAN’s efforts to promote Public Private Partnerships (PPPs). Additionally, the Council urges supporting the establishment of an ASEAN-wide regional network of Intellectual Property (IP) education, encouraging two-way investment, easing the environment for American businesses operating in and exporting to the region, and working with state Governors and the administration’s SelectUSA program to significantly increase both the scale and diversity of ASEAN investment in the U.S.

3. Complete the ambitious TPP negotiations by late 2013

This move could be facilitated by the rapid passage of a Trade Promotion Authority bill, and the inclusion of the full spectrum of market access for goods and services, intellectual property, investment, and other trade policy issues.

4. Simplify visa policy and facilitate business travel

The U.S. should permit full participation in the APEC Business Travel Card program for its citizens, and expand similar programs to the three ASEAN members who are currently outside APEC.

5. Increase CEO engagement

The Council proposes CEO missions to the region to develop concrete trade and investment opportunities, build long-term top-level personal relationships, and improve understanding on all sides of the possibilities opening up for the future.

According to the Council, the above statement of priorities and five-year agenda will enable a full-fledged economic partnership between the U.S. and ASEAN, deepening trade, investment, and financial ties.

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